Predicting the Global Economic Crisis

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This article originally published by teleSURtv English Edition, 3-28-15

“Two events occurred last week that mark a further phase in the waning of US global economic hegemony: China introduced its own Economic Development Bank, the ‘Asian Infrastructure Investment Bank’ (AIIB); the IMF simultaneously announced it will decide in May to include the Chinese currency as a global reserve-trading currency alongside the dollar, pound, and euro—an almost certainly ‘done deal’ as well.

The dual moves caught the US off guard, especially as the USA’s erstwhile main economic ally, Britain, was the first to announce it would join China’s AIIB as a founding member. That announcement set off a quick succession of further announcements by major western economies that they too were now joining the AIIB—by Germany, France, Italy, Luxembourg, and Switzerland—as major European capitalist economies scurried to ensure a piece of the Asian economic action and to tap China’s huge foreign currency reserves for investment in their own economies. Singapore and Australia followed within days. South Korea and Canada are now reconsidering joining, as are other once solid USA economic allies.

The initial USA response to Britain was to accuse it of “constant accommodation” of China. US Treasury Secretary, Jack Lew, even made telephone calls to British finance minister, George Osborne, requesting that he ‘hold off’ after Britain’s initial announcement, according to reports in the international business press. That effort was apparently to no avail, however, as British politicians, including prime minister, David Cameron, facing re-election within weeks, chose to leverage the decision for political purposes as well as economic. Reportedly the US also attempted to strong-arm Singapore into not joining, but failed there as well.

The entire affair caught USA political bureaucrats by surprise. The matter of joining the AIIB was thought to have been raised in European centers at low levels, but not at senior financial minister or ambassador levels. No decisions appeared imminent. Events in recent weeks show the Europeans successfully kept USA out of the loop concerning their real intentions, as Britain last week ‘jumped the gun’, as they say, with British government officials giving the reason for their decision to join the AIIB as “We want to be a Chinese partner of choice in international finance”(read: we want a slice of the economic pie before someone else gets to eat it).

The China-UK Connection

In making their announcement, British officials vowed that they want the UK to become the main destination for Chinese investments. In 2013-14, when the British and Euro economies were in particularly bad shape, major trade delegations from China repeatedly visited both Britain and Germany on numerous occasions. Much of Britain’s recent tentative economic recovery the past two years has been driven by infrastructure and property deals that have been heavily financed by massive China private capital inflows into London real estate, infrastructure projects, and south England investments. Deals to revitalize investment in Britain’s nuclear power sector are also being financed by China investment. Without China investments in the UK in recent years, and other capital inflows from emerging markets, British economic ‘recovery’ would have remained British ‘stagnation’ at best.

USA vs. China policies toward British banks offer another example of a growing divergence of interests between the USA and Britain with regard to China.

USA bank regulators have been targeting and fining London banks for their repeated scandals, money laundering, global interest rate (Libor) manipulations, and speculative excesses. London in recent years has become a veritable ‘wild west’ of international banking. The US levying of fines on UK banks has been justified. But banking is one of the few industries that keep Britain from becoming a ‘third tier’ economy. British Prime Minister Cameron therefore has done—and will do—whatever it takes to protect and advance the economic interests of his so-called ‘City of London’ (UK banking sector). He is even prepared to leave the European Union, if necessary, to prevent re-regulation of the British banking sector. So it should not have been a surprise to the USA when Cameron and other conservative British politicians turned to China and quickly joined China’s AIIB. All the signals were there already. British finance capital had already last year, in 2014, announced an agreement with China that London would become the global trading center for China’s currency, the Yuan. And Britain has become increasingly dependent on China money capital inflows in recent years, as noted. So the recent AIIB decision is just a logical consequence of deepening British-China economic relations that have been already underway now for some time, even though the USA didn’t totally ‘see it coming’.

Deepening China-Europe economic relations extend to the Eurozone and eastern Europe economies as well, not just to Britain. Trade integration between China and Germany has been growing sharply. China is Germany’s fourth largest trading partner. China has been setting up investment funds in eastern European economies from the Baltics to the Balkans; China has an offer on the table to buy Greece’s main port at Pireaus; and in recent years has been repeatedly purchasing Italian and other southern European countries sovereign bonds to help those economies weather their recent debt crisis.

Origins of the AIIB

The origins of the AIIB announcement trace back at least to 2010, when the USA quietly agreed to allow China to increase its influence in the USA-dominated international economic institution, the International Monetary Fund (IMF). Since then, however, the USA has reneged on that agreement, in order to ensure that China’s influence in the IMF would remain minimal. So China went off last October 2014 and formed its own AIIB, in what amounts in effect to a fundamental challenge to the IMF’s parallel USA-dominated institution, the World Bank.

With 27 nations having already signed on, including Britain and other Europeans, Australia, Singapore, and others, the AIIB represents a major challenge to the USA-dominated development banks, the World Bank, as well as to the Asian Development Bank (USA and Japan dominated ADB) located in Manila, Philippines. Initially the AIIB is to be funded with $50 billion to invest in Asian infrastructure. That compares with $160 billion in the Asian Development Bank (ADB). However, the near term AIIB target is to provide $100 billion in funding. And by 2020, potentially up to $730 billion. That’s a lot of projects and potential profits for European and British businesses.

Britain and the other European economies were quick to join China’s AIIB because it allows their own companies almost guaranteed participation in the AIIB’s lending projects—thus giving them a ‘leg up’, as they say, in their competition with USA and Japanese companies involving development and infrastructure investment projects in the EMEs. It also gives them, the British and the Europeans, the opportunity to redirect some of that investment capital to companies inside their own economies, where their own companies get to provide semi-finished goods and services to the infrastructure projects in Asia that the AIIB will approve with its initial (and no doubt soon to expand) $50 billion fund.

Indeed, Europeans have become increasingly frustrated with USA dominated World Bank and IMF, in which the USA typically vetoes decisions of those institutions that it dislikes with as little as 20% of the ‘voting rights’ in those bodies. At the same time, conservatives in the US Congress continue to refuse to provide the US’s share of the operating funds for those institutions. China’s AIIB enters the global infrastructure investment field with a promise by China not to veto and to hold no more than 49% of voting rights in the AIIB. It is an attractive alternative to the USA’s World Bank and IMF dominated bodies. Not surprising, Europe and other major economies are therefore seriously interested in participating in the AIIB. However, to the extent they do, it represents a waning of USA economic influence over its once, almost completely economically subservient allies.

The ‘Old Order’ of US Economic Hegemony

The USA’s dominance of the IMF and World Bank since 1945 has provided Washington with great leverage in influencing both political events and economic directions in emerging market economies (EMEs). Often multi-billion dollar lending projects are dangled before an EME, or threatened with suspension, if the EME in question fails to do the bidding of Washington involving a political decision Washington wants, or an investment concession Washington wants from the EME for a US bank or company.

A good example of the kind of ‘economic arm-twisting’ by the USA still going on today is the pressure exerted by USA government and courts to force Argentina to agree to terms demanded by USA shadow banksters with regard to the repayment of loans; or the moves underway by USA government and banksters to drain Venezuela’s currency reserves to effect a collapse of its currency, the Bolivar, to set off import inflation to set the stage for another coup and political intervention. Those are extreme, but not untypical, examples; countless ‘lesser’ forms of pressure on EMEs occur frequently by the USA through its control of decisions by the IMF and World Bank. Ukraine is another, perhaps more traditional example, where the USA has influenced the IMF to install US citizen, shadow bankers, like private equity CEO, Natalia Jaresko, to run the Ukraine’s economy as finance minister as a condition for the Ukraine receiving IMF loans.

But by providing an alternative source of infrastructure project funding, the China AIIB reduces potential USA economic and political influence over EMEs.
From 1944 to 1973 the U.S. maintained more or less total economic hegemony in the global economy. The U.S. dollar was the prime currency for trading and reserve purposes. This dominance was challenged in the post-1973 period briefly, however, as the U.S. economy experienced an economic crisis at that time. The institutional arrangements by which the U.S. retained dominance from 1944 to 1973 were restructured and rearranged. The U.S. economy and its world dominance was restored in a new set of arrangements and relationships with other states and economies starting in the 1980s, which is sometimes referred to as ‘Neoliberalism’. The symbol of that economic dominance, the U.S. dollar, after having seriously weakened in the 1970s was restored again to unchallenged status as the global currency in the 1980s and after.

But the restructuring of the global economy in the 1980s, led by the United States (and a junior partner the UK) has now run its course for a second time.

Once the unchallenged global currency, the U.S. dollar is once again facing challenge as the dominant global currency. US dominated global institutions like the World Bank and IMF are being challenged by alternative institutions, like the AIIB. The focal point of that challenge, today and in the years ahead, is China. The Yuan will not overturn or replace the US dollar tomorrow, or even in the near term. The World Bank and Asian Development Bank won’t be displaced by the AIIB. But in the longer term it is inevitable, should China continue to grow at its recent rates and the USA continue to lag with its recent below historic average growth rates.

Recent events surrounding the AIIB, and the IMF adding the Yuan to its currency mix, are just a subset of the broader and even more strategically significant rise of the Yuan as a global trading and reserve currency and of alternative institutions developed that break the hegemonic control of global economic institutions by the USA.

Jack Rasmus is the author of the forthcoming book, ‘Systemic Fragility in the Global Economy’, by Clarity Press, 2015, and the prior book’s, ‘Epic Recession: Prelude to Global Depression’, 2012, and ‘Obama’s Economy: Recovery for the Few’, 2012. He has been a local union president, negotiator and representative for several American unions. He blogs at jackrasmus.com.

The following Alternative Visions Radio show of 3-28-15 second half hour addresses the topic, ‘Is Inter-Capitalist Competition Intensifying?’. The first half hour interviews director, Michael Albert, of the just launched radical online ‘Z School’, in which Jack Rasmus has agreed to teach a new course: ‘Finance Capital in the 21st Century’.

Jack Rasmus and Alternative Visions show returns to air with new shows. A two part show re-launches Alternative Visions today. In the first part, Jack interviews long time progressive activist, writer, journalist and educator, Michael Albert, of the ‘Z Collective’ to explain the new radical political online school being launched starting next week, called ‘Z School’. Z school is a new addition to the ‘Z’ media network consisting of ‘Z magazine’, ‘Znet’ global blog, and the recently established journalist reporting by Z writers for South America’s new tv network, ‘teleSUR’. Albert explains how Z School works, providing online practical, progressive, political education classes by long-term seasoned activists from around the world for interested participants. Low cost, lower cost, and no cost classes are available. If interested, more information on Z school, to start in April, is available by going to: https://zcomm.org/zschool/moodle . In the second half of today’s show, Jack discusses examples of growing inter-capitalist competition globally, now beginning to assume new, more aggressive forms as US, European, Japan, and OPEC countries and capitalists are now beginning to embrace more aggressive forms of competition with each other, as the slowing global economy forces them into ‘beggar their (capitalist) neighbors’ in an ever-desperate seeking of fading economic growth.

Passage of the “Trans Pacific Partnership” (TPP) free trade agreement between the USA and 11 other pacific rim countries has been the number one economic priority of both political parties in the USA since last November 2014’s national Congressional elections. Concluding a TPP deal in 2015 is right up there — along with across the board corporate tax rate cuts — at the top of Corporate America’s “must have” list for this year.

But the window may be closing on concluding a deal. That’s why American trade negotiators are desperate for “fast track” authority to accelerate the effort to finish negotiations — before global developments force the window shut.

Republican and Democrat representatives and Senators in both houses of Congress in the USA, as well as the Obama administration, have been pushing hard for passage of the TPP since December 2012, when the most recent media-legislative campaign to pass a TPP deal was rolled out immediately following the presidential elections the month before.

The TPP-Free Trade USA push goes back even further, however, to at least 2010. That’s when Obama put Jeff Immelt, the CEO of the giant U.S. global corporation, General Electric, in charge of a special Presidential Committee tasked with coming up with recommending future USA trade initiatives. TPP was one of them.

But before acting on Immelt’s 2010 recommendations, Obama had to first wrap up the loose ends of the several bilateral free trade agreements still on the table between the USA, South Korea, Colombia, Panama and other countries. Then there was the 2012 presidential elections. Obama and Democrats knew trying to push the TPP through before would risk their re-election chances. So they waited. Then came the November 2014 midterm Congressional elections. Better wait again, since Democrats in Congress coming out for TPP might jeopardize union and consumer support for their re-election, and potentially cost the administration and Democrats their majority in the Senate — which they lost anyway due to many reasons.

But now, early 2015, the short term political risks are reduced and bilateral free trade agreements with the other countries have been completed. Now the majority of Congressional Democrats, nearly all the Republicans, and the Obama administration are all united on the goal of pushing through the most massive free trade agreement to date, called the TPP. How massive? No less than 40 percent of the world’s total annual GDP and a third of all global trade, that’s how massive.

U.S. Corporations and Corporate Parties United for TPP

The vast majority of members of Congress, in the House and Senate alike, don’t even know what’s being negotiated in TPP. Except for perhaps a few in-siders in both parties, virtually no one in Congress has any real information whatsoever as to the details of the current TPP negotiations. Only the trade representatives of the 11 countries and their invited guests, the representatives from global corporations, are privy to what’s being discussed in the 28 industry negotiating sessions.

Of the 566 groups that have been invited to attend the negotiations at various levels, 480 are apparently representatives of businesses, trade, and industry groups. The rest are pro-trade academics, a smattering of sympathetic NGOs that benefit from corporate contributions, and a few token union representatives in the pockets of their corporations or governments at home.

From what is known from the periodic leaks from the discussions, it appears proposals for TPP are heavy on permitting capital to freely and easily enter a country, for profits to be just as easily repatriated, for wholesale privatization of public enterprises, and for proposals to allow corporations to sue governments in global secret courts if national laws are passed that challenge any provision of the TPP — to name but the most corporate-friendly measures being proposed.

Even though there are apparently no provisions for Congress to receive progress reports on the status of negotiations, nevertheless a majority in Congress is about to vote in April in favor of TPP, and specifically on a strategic measure will increase the possibility of passage of TPP soon after. That vote and measure is called “fast track” authority.

Fast track means Congress agrees with the president’s negotiating demands before an agreement is struck, and then votes quickly on it once it has, voting yes or no, without any amendments or procedural delays in the legislation making TPP a law in the USA. In other words, if “fast track” passes, whatever the President’s trade negotiators agree on will quickly become law of the land. Corporate America in particular likes “fast track.” It means whatever anti-worker, anti-consumer, anti-environment and deals are agreed to at the negotiating table cannot be challenged, amended or reversed by Congress when the vote comes up.

“Fast track” passage in April will mean the push to conclude a TPP deal will accelerate and intensify in subsequent weeks. It means the path is politically paved to conclude a TPP deal asap. Passage of fast track is not the ‘endgame’, but it’s damn near close to meaning just that.

Recent USA history shows that a massive, free trade treaty like TPP can only be passed with the support of a Democratic president and Democrat support in Congress — just as Democrat Bill Clinton was essential for passing the previous USA free trade initiatives in the 1990s: the North American Free Trade Agreement (NAFTA) and opening up China-USA trade by proposing the Preferred Nation Trading Rights (PNTR) for China, a quasi free trade measure.

If another Democrat is elected president in 2016 — an unlikely but possible event — that Democrat will have to wait until 2018 or later to push for TPP. And if a Republican is elected president in 2016, it is likely that Democrats may not support TPP in Congress.

Corporate America does not want to wait that long for TPP, given either those events. It wants TPP now, not later. The political timing on the USA side is right, in its view, given the current party alignments in Congress, and with the current Democrat President, Obama, a strong, unequivocal advocate of free trade agreements like TPP since 2010. (In contrast to his election promises in 2008 when he said he would not support more free trade agreements). But there’s another reason “why TTP now.” They all know — corporations, Republican and Democrat politicians, and the Obama administration alike — that the longer they wait, the more unstable the global economy will continue to become, and thus the more difficult will become the concluding of a TPP deal.

Not only are internal U.S. political alignments the best in years. But the external global economic developments can only get worse over time. The U.S. side of the negotiations are in sync, with all the corporate and pro-corporate players agreed on doing a deal quickly. But the rest of the 11 TPP countries in negotiations will find it increasingly difficult to agree to a deal as time goes on, as their economies become more unstable and slow.

The Global Instability “Wildcard”

Time is not on the side of advocates of the TPP in the USA and they know they need to accelerate the process.

The global economy is slowly but steadily unraveling. Currencies are becoming more volatile. More economies are slipping into recession. Inter-capitalist competition is shifting and assuming more aggressive forms. Real investment is slowing everywhere. Trade in commodities, including oil, is collapsing in price and volume. Furthermore, these trends are going to get worse, not better, and will likely continue to do so in what remains of 2015-16. Only a short window may exist therefore this year, or early next at the latest, to conclude a TPP deal. Here’s why.

The quantitative easing (QE) programs of the two weak links today in the advanced economies — Japan and the Eurozone — are causing increasing global currency instability. And the more currency instability, the more complicated the negotiations for TPP will become, as well as the more difficult it will be to conclude a deal.

Japan set off the current deepening currency war in 2013 when it introduced its first QE. That had little to no effect on Japan’s real growth but it boosted stock prices for a while and then, like all QEs, even that dissipated. Japan fell into another recession, its fourth since 2008, during early 2014. So it increased is QE-liquidity injections last fall 2014 still further, as it expected the Eurozone to introduce its own QE, which the Eurozone did just recently.

Then there’s the matter of China. Not a party to the TPP negotiations, China’s general economic slowdown underway will undoubtedly result in China allowing its currency, the Yuan (reminbi), to decline as well, in order for China to boost its exports too.

So all three major regions — Japan, China, and Europe — are driving down their currencies to get a short term export (and economic growth) advantage. Unable to confront this ‘triple threat’ to their exports, many of the 11 Asian rim TPP countries are becoming desperate to increase their exports in response—as are most of emerging market economies in general worldwide. And where better to do that than to open and raise new demands and to request even more concessions from the USA in current TPP negotiations?

As their own currencies rise in value, and their economies slow, many of the 11 will also seek even more guarantees of USA to ensure direct investment into their economies. But with the U.S. dollar rising sharply, U.S. corporations also want and plan to invest heavily in the Eurozone and Japan economies. How will the USA assure the 11 TPP partners that U.S. corporations will invest even more money capital in their economies, when there are growing opportunities at the same time for even better investments in Europe and Japan, and of course China.

There’s also the matter of collapsing oil prices. This will undoubtedly complicate the energy track discussions in the TPP negotiations.

Then there’s the USA dollar and imminent U.S. interest rate hike policies. The rising dollar and U.S. interest rates mean capital outflows and even capital flight are high on the agenda for a number of the 11 TPP negotiating countries. Will the USA agree in TPP negotiations to lower the dollar’s value as concessions in TPP bargaining? Not likely, give the growing consensus to raise interest rates in the USA very soon, either this June or September at the latest, which will continue to drive up the dollar and in turn suck money capital out of many of the 11 other TPP partners in the form of capital flight and redirected investment. The TPP 11 will want to know what their USA partner is going to do about all this. They will want more concessions, in exchange for the USA demands for intellectual property and software products protections, patent protections, more opportunities for U.S. banking access to those countries, and so on.

There are literally dozens of other examples and ways that current TPP negotiations can, and will, be up-ended by the monetary policies of Europe, Japan China, and the USA. Global currency instability, falling exports, redirected global investment flows, capital flight, etc., will impact TPP negotiations significantly in the coming weeks and months as the global economy becomes still more unstable and continues to slow. TPP negotiations will become even more complicated, more time may be needed to conclude a deal, and the negotiations themselves may be suspended in part.

All of which does not bode well for concluding a deal long term. A deal must be struck quickly, in the shorter term, according to the Corporate view. All of which leads to the key to the entire process: the current rush to conclude fast track, to get a TPP deal as quickly as possible. For it is fundamentally for TPP negotiators a race against time, given the progressively deteriorating global economy.

The Politics of TPP

TPP is not only about U.S. multinational corporations getting a free entry into economies that make up a third of world trade and constitute 40 percent of world GDP. It is also about Obama’s, the U.S. military’s, and U.S. neocons “pivot” to Asia to contain China.

Without concluding the TPP, the USA’s ability to contain China on the economic front — a strategic necessity for its political and military containment goals for China — will unravel.

China is already causing the USA major concerns on a number of economic fronts. There’s China’s recently announced $50 billion development bank, designed to rival the USA-dominated World Bank. There’s Russia’s turn to deeper economic relations with China, especially with regard to oil and energy, which threatens long term to raise energy prices in Europe to unpleasant levels. There’s China’s deepening trade deals with Germany, making it already one of Germany’s prime trading partners; China’s buying of sovereign bonds in southern Europe to help bail out the Italian and other economies in that region; its targeting of east Europe and Baltic economies offering billions in new funding there to increase its influence; its negotiations with Greece to provide assistance (including buying the Piraeus port) as that country confronts its European bankers insisting on continuing austerity; and there’s the recent announcement, just days ago, that Britain — with its so-called “special relationships” with the USA — is breaking ranks with the USA and deepening its financial relations with China. The UK had already become the future currency trading hub for the China Yuan, as that currency challenges the US dollar long term. But now, in a surprise announcement, the UK has agreed to participate in China’s new global development fund as well.

If the USA fails to conclude the TPP deal, designed to contain China economically, it is likely that China will subsequently sweep up a good number of the 11 countries in current TPP negotiations into its own economic orbit and its own regional free trade agreement. Should that occur, the USA’s political and military pivot to Asia will be limited to Japan and South Korea.

Should TPP negotiations fail, much of South Asia, and potentially even Australia with its heavy dependence on raw materials and commodities trade with China, could adopt a more neutral economic position vis-à-vis China and the USA — instead of acting as pro-USA allies, as in the past.

Much is riding on the TPP, in other words, politically as well as economically, for the USA. That’s why U.S. trade negotiators are pulling out “all the stops,” as they say, to accelerate concluding a TPP deal. That’s why “fast track” is so important to them. Without it, “all the stops” don’t get pulled out. In short, so goes TPP, goes the USA “pivot”; and so goes fast track goes TPP. But in the end, as goes the global economy, so goes all the rest.

Jack Rasmus is the author of the forthcoming book, ‘Systemic Fragility in the Global Economy’, by Clarity Press, 2015, and the prior book’s, ‘Epic Recession: Prelude to Global Depression’, 2012, and ‘Obama’s Economy: Recovery for the Few’, 2012. He has been a local union president, negotiator and representative for several American unions. He blogs at jackrasmus.com.

Capitalism is by nature based on intense, and often destructive, competition. Not only between capital and labor, but between capitalists themselves. But not all competition is the same. There is competition when the global economic pie is growing; and there is competition when it is stagnating or declining. And in recent months signs are growing that new forms of more intense, aggressive inter-capitalist competition are emerging as the global economy continues to slow in general, and even stagnant and slide into recession in a growing number of countries.

Competition in ‘good’ times of steady economic growth occurs within certain generally accepted rules of capitalist competitive behavior: permitted, and even expected, are inter-capitalist competition over who can cut costs and prices the most or fastest to grab another capitalist’s market share, who can get a bigger investment foothold in their competitor’s home market, or get a competitive product faster to market, who can leverage new production technologies faster, or who can get one’s government to provide a better tax cut, better manipulate free trade to open up foreign direct investment into another capitalist’s local economy, and so on.

Governments always have played a key role in the inter-capitalist competition game. But the forms of assistance that governments undertake in support of the competition game also can change over time: manipulating domestic tax policy, lowering interest rates, cutting benefits costs, and assisting companies in holding down wage gains, are all typical measures governments employ on behalf of their home-grown capitalists (and electoral campaign contributors) in ‘good’ times. Such measures represent enhancing capitalists’ competitive positions at the expense of their domestic working class, consumers, and/or wage earning taxpayers. But there are still other potential measures, ways for ‘taking away’ shares of income not only from workers but from other capitalists outside the home market, i.e. in other countries and economies.

As the ‘good’ times have transitioned to ‘bad’ in recent decades, and especially since 2008, the rules of the competition game have been changing—not only with regard to ‘taking away’ income from workers and consumers, but from gaining income at the expense of foreign capitalist competitors.
When the rules of the competition game between capitalists break down altogether, the result is war—i.e. the ultimate form of inter-capitalist competition. The two World Wars of the 20th century immediately come to mind. The fight for colonies and resources was particularly obvious in the case of the First World War, while the Second War was the consequence of unresolved issues left over from the First World War, as well as the consequence of the economic collapse of global capitalism in the 1920s and 1930s.

More recent and on-going, USA led wars in the middle east this century are also testimony of the periodic resort to war and military conflict on behalf of national capitalists interest. The Middle East wars starting in 1990 and intensifying in the early 21st century, have been fundamentally about ensuring resource availability to USA and the other advanced economies, especially oil.

Memoirs of key members of the US economic elite after the 2003 invasion of Iraq have admitted that the Iraq invasion was fundamentally about oil—even if that acknowledgement by US politicians and the press still has not been forthcoming.

More contemporary still, there’s the USA direct intervention to pull off a coup d’etat in the Ukraine last year, and then subsequently the setting up of USA neocon-cum-shadow bankers to run that country’s economy that took place last December 2014.

Competition by war may be forbidden within and between the advanced economies, but Ukraine is viewed as an acceptable ‘border conflict’ outside the ‘no military economic competition zone’, at least to the USA. To the Europeans, on the other hand, the Ukraine is viewed as more internal to the zone. Hence, they are more nervous about the conflict.

The related case of Russia is even more interesting. The Europeans are more nervous than the USA about the new ‘rules of the competitive game’ in the case of Russia. Those new rules mean severe economic sanctions to undermine Russia’s economy. Strongly favored by the USA, for Europeans economic sanctions are considered risky. Not only because of the reverse impact those sanctions are having on their European economies, but also because of the potential precedent setting they represent. If Russia is within the ‘no military competition’ zone, as many Europeans see it, then to economically compete with Russia by means of sanctions is a dangerous precedent. Like competitive devaluations, economic sanctions can cut both ways. Both competitors can resort to the same, and neither typically prevails in the end economically.

Furthermore, where do sanctions stop? What if Greece refuses to abide by the European Troika’s demands for a new debt agreement? What if Greece unilaterally leaves the Eurozone? Are economic sanctions against Greece a proper response to force them to pay up the $270 billion Greece owes the Eurozone bankers and governments should Greece leave?

Recent wars in the Middle East, Ukraine, and elsewhere have not involved military conflicts between the advanced economies of North America, Europe and Japan. Instead, what they represent is the advanced economies beating up on local emerging market capitalists and their governments, as the former maneuver to secure key interests on behalf of their respective capitalist classes at the direct economic expense of those emerging markets.

Obviously, inter-capitalist competition by means of military conflict between the advanced economies (USA, Europe, Japan) is not on the global agenda today. Not even close. It is reserved for those countries and economies outside the advanced economies’ orbit. But the rules of the competitive game within and between capitalists in the advanced economies, rules that that were in effect in previous years, also appear to be fading.

New rules are emerging. More accurately, the old rules are breaking down over what’s ‘off limits’ in terms of acceptable forms of inter-capitalist competition within and between the advanced economies. The advanced capitalist economies are thus entering a stage—a kind of competitive ‘no man’s land’—where new and more aggressive forms of competition between them are emerging.

In between the one extreme of government intervention on behalf of home-grown capitalist interests in the form of direct military conflict—and the other of advanced economy governments engaging in normal competitive measures (such as domestic tax, trade, monetary, and wage policies on behalf of their respective capitalist interests)—lay a ‘middle ground’ in which new forms of inter-capitalist competition that are more confrontational are emerging, but which are yet short of direct violence and war. Not the ‘normal’ forms of competition based on trade, technology, cost reduction, etc., and not yet military confrontation to secure economic interests, but something in between in terms of intensity and aggressiveness.

Some of the more obvious forms of this new, more aggressive, intensifying capitalist competition include the following:

· The USA government going after the European banks by levying and extracting multi-billion dollar fines and by introducing measures making it more costly for Euro banks to do business in the USA market—both measures of which are undertaken in order to boost the poor economic performance of US commercial banks.

· The European governments, in a tit-for-tat response, going after USA tech companies, requiring multi-billion dollar equivalent payments in taxes, levying fines, demanding organization divestment and break ups of the US companies in Europe, in an effort to make their own European tech companies more competitive with USA tech giants like Google, Microsoft, and others.

· The eruption of the global fight between the US shale gas/oil producers and the OPEC oil producers, led by Saudi Arabia and its neighbor oil emirates.

· The massive Quantitative Easing (QE) programs introduced by Japan in 2013 and 2014, and the Eurozone’s imminent QE in 2015—both programs of which designed to gain exports at the direct expense of other capitalist economies (including each other) and to stimulate capital inflows from other economies into their own to boost their stock and bond markets, make up for failing Euro bank lending, and promote foreign direct investment into Europe from Asia, China, and emerging markets.

· The increasing use of economic sanctions as a means to drive competitors out of targeted regional markets, and open up the same to one’s own capitalist producers

Last Friday, February 20, Greece’s Syriza government agreed to a four month extension of the current debt package that has been in effect since Greece’s last debt renegotiation in 2012, thus agreeing to the main demand of the Troika that it do so as a condition for further negotiations. Some have read this as a ‘sell-out’ by Syriza of its election promises to reject the austerity measures the Troika established in 2010 and 2012, which have kept Greece in a condition of perpetual economic depression for the past half decade. By agreeing to continue current debt arrangements for another four months, critics say Syriza has also reneged on its promise to reject the Troika’s previous debt deal. The same critics argue that Syriza should have simply declared ‘no’ to extending both the current debt package and related austerity measures by the February 28 expiration date. And if the Troika didn’t like it, so be it; Greece should just leave the Euro currency zone.

But these criticisms and the alternative recommendation to just leave the Eurozone are premature and ill-conceived. And the alternative of leaving the Euro by the February 28th expiration date (or soon after) would have been a disaster for Syriza and Greece, both economically and politically. By agreeing to a very temporary four month extension, Syriza has tactically made the smart move. Here’s why.

From the very beginning the Troika’s primary objective has been to extend the current debt and austerity terms ‘as is’, i.e. in perpetuity. That would mean leaving Greece in depression in perpetuity, and having to revisit and renegotiate Greece’s massive debt load of $270 billion (more than its annual GDP) repeatedly every few years, resulting in the piling of still more debt on existing debt and requiring even more austerity.

Even if the Troika’s representatives know this arrangement is unsustainable in the long run, which many no doubt do know and some have publicly even expressed so, they had little choice but to have continued to do so by the February 28th deadline date of the old agreement. With the Eurozone economy in deep trouble, with its widespread economic stagnation, its continuing slide into deflation, the still massive debt owed by its other periphery economies, the rising populist parties on the right and left, growing negative effects on it created by US-induced sanctions on Russia, and the prospect of a bottomless black hole of debt and bailouts in the commitments it has made to lend money to the Ukraine—unilateral reductions in prior Greek debt at a single stroke by the Troika are not a prospect the Troika could even begin to publicly consider by February 28 or even any date in the foreseeable future.

The Troika’s Cliff

The Troika would have instead allowed the Eurozone to ‘go over the cliff’ after February 28 and let Greece leave the Eurozone, thus dragging Greece over the cliff with it had Greece rejected an extension outright and left the Euro on March 1.

February 28 was simply not enough time for the complex bureaucratic political and banking interests behind the Troika to agree to anything representing fundamental change in Greece’s debt and austerity measures. Nor was it enough time for Greece itself to prepare for the worse—i.e. an exit—or to develop a more effective strategy in confronting the Troika by seeking allies and support within the Eurozone and within the global community as well. The timing was not right. Principles are important in negotiations; but so is strategy and timing. And declaring an end to debt payments, to austerity in general, and exiting the Euro in turn would have been committing a fundamental error of confusing a tactic (leaving the Euro) with a strategy (ending austerity).

Had Greece left the Euro, the economic effects of that precipitous move were already becoming apparent: capital flight out of Greece was already accelerating, pressures for a run on Greek banks within days were growing, rates on Greek debt were escalating rapidly, and prospects of runaway inflation rising. All the above would have intensified post February 28th. Unknown political consequences would undoubtedly have arisen. It’s not unlikely that the USA and Europe would have unleashed their NGOs and other forces of political destabilization, which we have seen in recent years has become a standard practice everywhere, to effect a political crisis and regime change in Greece. It is well-known that USA Treasury Secretary, Jack Lew, in the week preceding February 20 made direct personal calls to Syriza. No doubt veiled threats, economic and political, were made on behalf of the USA’s banker-political allies in the Troika. These are realities Syriza no doubt had to consider, along with the obvious severe economic impacts of a precipitous and ill-prepared decision to exit the Euro on February 28. The economic crisis would have meant a much worse immediate economic environment for the Greek people, at least in the short run.

Greece’s choice was: precipitate a crisis on February 28 by declaring an exit from the Euro, without having prepared effectively politically and economically for the exit in the brief time it has had to do so; or get whatever minimal concessions it can from the Troika on February 28th, agree to what it must temporarily agree to for the shortest possible period, and buy time—to properly prepare for a possible Euro exit and line up alternative sources of credit should the worst occur, to prepare the public for the consequences, see what ‘splits’ can be wedged in the Troika opposition (which had begun to appear) during the negotiations over the four month extension period, and, in the interim of the four months, maneuver to implement whatever initial rollbacks of austerity might be possible as a first step toward a more aggressive later program.

Whose United Front?

With regard to the question of Greece possibly leveraging potential differences within the Eurozone, during February some Euro ‘soft-liners’ had already floated the idea of allowing Greece to swap old bond debt for what is called ‘GDP or growth bonds’. In the latter, debt payments would only be made if Greece grew economically in real terms. If no growth, then no debt payments, and suspension of debt payments technically means more funds to reduce austerity.
Of course, all that needs still to be negotiated, and the ‘hardliners’—Germany, its central bank allies, the IMF, were opposed to such debt payment adjustments. They know a bond debt swap agreement opens the door to negotiations on some austerity suspensions since it reduces the debt repayments. It is perhaps notable that the Eurozone Commission, and a number of Euro country finance ministers are not as hardline as the German central bankers, IMF and ECB, who had gained the upper hand within the Eurozone in the closing weeks of February.

But as they continued their hardline opposition, within the Eurozone other’ softliners’ were suggesting other ideas aside from ‘GDP bond debt swaps’ designed also to lower debt payments by extending the loans by decades, to 50 years, or even in perpetuity. That too would lower annual debt payments and take some pressure off of austerity in the short run. And others were suggesting converting the bonds’ current principal and interest payments to interest payments only, with the same potential result. So there is no united front within the Eurozone. But precipitating a final clash with the hardliners on February 28 would not have given Greece the opportunity to explore leverage in negotiations with the softliners. Extending the agreement for another four months provides that option at least, even if it is not guaranteed to produce results favorable to Greece.

Minimizing or somehow postponing debt payments by any of the above adjustments raises the possibility for austerity roll backs. Opening the door wider to enable even more rollbacks is also potentially possible if Greece can negotiate a reduction in the stringent national budget surplus now dictated by the current agreement.

With regard to this latter point, several Eurozone countries and their current centrist social democratic parties, specifically France and Italy, have been themselves campaigning for a reduction in their annual budget surplus targets their previous even more pro-banker governments had agreed to. That surplus, of 3% to 4% or so, in effect meant France-Italy would have to cut government spending at a time, today, during which their economies are stagnating or in recession. Both therefore want to increase government spending to generate more growth. But they recognize that is not possible without a reduction of their current budget surplus target. But if France and Italy prevail in reducing their target, then why not Greece? And why not Greece seek allies and support from France and Italy in a joint effort? Reducing Greece’s budget surplus target would, in effect, free up more government revenues to spend to reduce austerity—by hiring back government workers, not cutting or even restoring pensions, improving health care services, not having to privatize electricity services, and so on.

Greece therefore needed time to ‘court the doves’ in the Eurozone centrist governments and to encourage allies willing to propose alternative measures that would reduce debt payments. That time would have been forfeited and lost if Greece had declared an exit on February 28 and/or not agreed to a four month extension.

Greece also needs time to line up possible supporters within the broader global community—both political and potentially economic support. In the meantime there is nothing to stop Greece from maneuvering with a scalpel to cut back ‘this or that’ austerity measure. All these strategic opportunities would have been closed off to it if Greece had rushed to leave the Euro on February 28, declared it was not going to pay any debt any longer and discontinued all prior austerity measures overnight.

The trade-off before it on February 28 was economic chaos and potential severe political instability vs. the possibility to negotiate debt reduction based on one of the possibilities above and to roll back austerity, albeit in stages or phases rather than all at once overnight.

If the Troika’s number one demand has always been to extend the past agreement of debt terms and austerity ‘as is’, then Greece’s number one demand has been to roll back austerity. The bargaining clash between the Troika and Greece leading up to February 20th was about which demand would be primary. Who’s agenda would drive negotiations. The Troika saw austerity as a necessary outcome of its primary objective of ensuring debt repayment; Greece sees debt repayment as the unnecessary requirement preventing its primary objective of austerity roll back. For the Troika, it’s about continuing debt payments and then talking about austerity changes; for Greece, it’s negotiating austerity changes first and then adjusting debt payments to accommodate those changes.
Greece’s Debt Extension Acceptance Letter of February 23

So, post-February 28th, whose primary position is now at the top of the negotiating agenda? Has either side succeeded in firmly establishing its priority and now dominates the agenda? The answer is no. Although only the outlines of the extension agreement are thus far available, it appears the letter Syriza sent on February 23 include the following:

First, the Troika got its ‘as is’ extension of current terms, its primary demand, but only for four months. After that, the current debt-austerity terms may well become null and void if no further, more permanent agreement is reached. In the meantime, in its agreement letter to the Troika, Greece left hard numerical details purposely vague. It reportedly has two months to clarify the details. In the meantime, Greece buys itself time. It can proceed with rolling back austerity measures, albeit more slowly and carefully, even though it may have agreed in writing in principle not to. What is the Troika going to do about it, if Greece leaves the extension vague, giving itself room to maneuver at home to continue to reduce austerity in the interim? Will the Troika throw Greece out of the Eurozone because it doesn’t like the lack of details? Break off negotiations? That would have repercussions, both economically and politically throughout the Eurozone and the Troika knows it. They’ll bluster and complain, posture in the media, they’ll threaten not to provide the bridge loans technically due Greece even under the old terms during the four month extension, but in the end they’ll continue negotiations nonetheless. They really have no other alternative.

In the meantime, Greece will focus on and point to its aggressive efforts to raise taxes, by cracking down on the wealthy tax evaders and tax collection corruption. It will cite these aggressive efforts called for in the agreement letter of February 23, as evidence it is proceeding to implement some of the terms of the extension.

Greece’s acceptance of the extension letter also indicates it will proceed with demanded government reforms to root out corruption, make government funding projects more transparent, and reduce the influence of Greece’s economic oligarchs who have shielded themselves politically the past five years from any austerity effects while the rest of the country has bore the burden of the same. That too will be held up as evidence of compliance.

Troika demands for labor market reforms—a program the Euro bureaucrats and bankers are pushing throughout the Eurozone—are tactically addressable by Syriza as well. It can say it is refunding pensions from increasing tax collections on the wealthy that have been effectively avoiding them and by other administrative reforms. It can point to hiring back government workers by reducing pay for top government bureaucrats and managers and by other plans to ‘streamline’ government which the Troika has demanded. It can raise the minimum wage and restore collective bargaining, noting these measures affect the private sector and don’t raise government spending; in fact, rising wages mean more tax payments and therefore more potential government surplus.

Greece’s February 23 letter apparently agrees not to roll back privatizations that have been already completed or ‘under way’. But the definition of the latter is not spelled out and those projects can be effectively placed on hold for at least four months or more. And it has not agreed to continue with further privatizations the Troika wants, such as the electricity system, a project that would certainly impact households and incomes. They will be reviewed on a ‘case by case’ basis, according to the letter. That means effectively, nothing to be done for another four months. In short, no rollbacks of past privatizations in exchange for a freeze on anything further.

In its letter Greece also indicates it will proceed with promises to reduce food costs, health care services and utility services for the poorest, which now constitute a large part of Greece’s households after five years of depression. It indicates the funding for these anti-austerity measures, which amount to around $2.15 billion, will be financed from other cost savings.

Notably, much of the social benefit and program measures will be financed not by budget cuts but by finding cost savings. That means provide the benefits and then look for ways to cut costs. That’s a dramatic departure from the Troika’s procedures of cut first and then adjust the benefit levels.

In the days following Greece’s acceptance letter, the hardliners within the Troika—Germany, its northern Europe central bankers faction, together with the IMF and ECB, have continued their hard line, insisting Greece provide more details in its letter. In contrast, the European Commission and a number of finance ministers have assumed a different public line. As the European business weekly, the Financial Times, reported on February 25, “Officials at the third bailout monitor, the European Commission, said the reform list had improved on outlines discussed at the weekend and, unlike the IMF and ECB, gave it unequivocal support”. So is the IMF and ECB playing ‘hard cop’ while the EC the ‘soft cop’? Or is the fact that the EC’s $142 billion Greek debt is that which is being considered, whereas the IMF’s and ECB’s smaller debt is not even in question here? Only time will tell. But the point is that Greece and Syriza have at least bought that time to find out, to prepare, and have in the meantime not really abandoned their primary goal of rolling back austerity—even if that goal’s attainment has been, of necessity, been slowed for a temporary four months.

Jack Rasmus is the author of the forthcoming book, ‘Systemic Fragility in the Global Economy’, by Clarity Press, 2015, and the prior book’s, ‘Epic Recession: Prelude to Global Depression’, 2012, and ‘Obama’s Economy: Recovery for the Few’, 2012. He has been a local union president, negotiator and representative for several American unions. His blogs at jackrasmus.com.

(The following is an interview of Jack Rasmus by Taylaln Tosun, published in the February 15, 2015 issue of TeleSUR English Edition)

Taylan Tosun:

Dr. Jack Rasmus, as you know, there is a strong discourse in the mainstream economy and finance media claiming that US economy is on a sustainable road to recovery. Pundits in the mainstream media claim that main indicators such as non-farm payrolls data, monthly job growths and workers’ hourly wages are all indicating a sustainable recovery for the US economy. Do you think that these claims are true? US economy is on the road to a sustainable recovery at last?

Jack Rasmus:

Every year for the past four years, pundits, media, government officials and even a good number of mainstream economists have said the USA economy is on the path of a sustained recovery—and every year they’ve been proven wrong. They focus on this or that economic indicator that may show a short term surge due to special temporary reasons, and then simply extrapolate from that, calling it a forecast, and predict a recovery. This year it’s the third quarter 2014 GDP growth surge of 5%, which will almost certainly revert back to 2.5% or so in the last quarter of 2014 and, I predict, even less in the current 1st quarter of 2015.

None of the major determinants of that 5% are long term and permanent, however. And that has been the case with these ‘one-off’ temporary surges in single quarter GDP data, which by the way are typically followed by single quarter, temporary collapses in USA GDP which have happened three times now since 2010. So the USA economy shows a pattern of ‘stop-go’, as I call it. It appears to recover with an above average GDP growth for a single quarter that then reverts back to a longer term sub-par historical average of around 2%. Actually, the 2% is less by several tenths of a percentage, when the GDP numbers are adjusted for the redefinition of USA GDP that occurred in 2013 which artificially boosted USA GDP by 0.2% to 0.3% percentage points. It’s even less if one adjusts for the underestimation of USA inflation which always occurs. The lower the inflation rate, the higher the real GDP number. So the USA economy is really growing longer term, at about 1.5%-1.8% on average, which is about half its past normal historical growth rate.

Looking at the 5% specifically, that was the product of a grouping of temporary factors that are now moderating. There’s the shale gas/oil boom that significantly boosted industrial production and related industry and therefore GDP. That boom began to end by late summer 2014 as global oil prices began to collapse. There was the one-time surge in health care spending that boosted US consumption as the Obama health care program sign ups surged for the first time for a full year. That has leveled off now. Falling oil prices in the second half of 2014 resulted in a sharp decline in US imports, which had the effect of increasing the contribution of ‘net exports’ to US GDP. Oil prices appear now to have stabilized somewhat. There was the increase in business inventory spending in anticipation of consumer spending escalating during the fourth quarter holiday season. But consumer spending was flat or well below predictions. All the hype int he press and by economists about lower oil and therefore gasoline prices resulting in more consumer spending simply didn’t materialize. Consumers mostly pocketed the savings, which I predicted would be the case. Spending on autos did increase in 2014, in part due to the lower oil prices, but that too is coming to a slowdown, I predict, as the auto sector becomes saturated after four years of growth. Then there was the surge in government defense spending in the 3rd quarter, which always occurs right before a national election in the USA, which occurred last November. That too will now slow, unless of course Obama gets his wish to spend another $64 billion on another war in the middle east, this time against ISIL.

So if one looks beneath the surface at the real trends what appears is that several temporary factors converged in the 3rd quarter to generate a temporary boost in GDP, and that GDP is again reverting back to longer term growth trends of 2% or less.

With regard to talk about USA jobs growth and wage growth about to boost consumption and GDP, I’m not impressed with the argument. First of all, much of the job growth is low pay, part time and temp jobs. And the so-called wage growth is really being over-hyped. It’s mostly concentrated at the ‘top’, among managers, professionals, and the higher paid workforce. It’s data reflecting full time employed as well, not the more than 50 million part time-temp workers in the USA today or the median family, whose income has been declining 1%-2% per year now since 2010. And as the recent oil-gasoline price decline shows, an increase in real spendable income does not necessarily translate into more spending and consumption. Given that the vast majority of households in the USA are still overwhelmed by debt, and still fearful of a weak economy, much of any wage-income increase is not spent but saved right now.

What all this suggests is that the USA economy is still on a stop-go trajectory longer term, or what I have called an ‘Epic’ recession, in which there are periods of brief, small recoveries followed by short, shallow downturns. This trajectory for the USA is occurring in the 1%-2% range, due to factors specific to the USA—like defense spending, US dollar as reserve and trading currency, influence over global money supply, and so forth. For Europe and Japan, it is occurring in the -1% to 1% range. But this does not represent a sustained economic growth by any means.

I would add that not only have the temporary factors behind the USA 3rd quarter GDP growth surge begun to dissipate, but that new negative drags on the USA economy are coming in 2015. The US dollar will continue to rise as other economies drive down the value of t heir currencies with QE and defacto currency devaluations. And the USA central back will raise interest rates, which will slow the US economy faster than they think, while driving the dollar still higher and choking off more exports’ contribution to US GDP.

Taylan Tosun:

If the recovery of US economy is not sustainable, that is, if all these indicators show only a temporary improvement which will not last long, what will this mean for the global economy and global recession?

Jack Rasmus:

On the one hand, the rising dollar—which may accelerate even more when the US central bank raises interest rates—will make emerging markets’, Europe’s, and Japan’s currencies more competitive and therefore potentially boost their share of global exports. But there’s a currency war underway now, set off by the big QE programs introduced by Japan and the Eurozone in 2013-2014. So it is likely that the Euro and the Yen will benefit the most from the rising dollar, at the expense of currencies of emerging market economies. Whether the gains in Europe-Japan at the expense of emerging markets has a global net positive effect on global growth remains to be seen. Emerging markets may lose more than Europe-Japan gains. Or the negative effects on the USA economy may more than offset the Europe-Japan export gains. It remains to be seen what the net total effect will be in 2015. But some things are clear: interest rates and the US dollar are going to rise further. That will result in more capital flight from emerging markets to the higher rates of return in the USA, as well as to Europe and Japan stock and capital markets to take advantage of the QE-induced rise in financial asset prices there. So, in net terms, it appears emerging markets will lose the most. I am personally of the view that the projected rise in USA interest rates will have a much greater negative effect on the USA economy than most economists are assuming. I think the elasticities will be great, of a negative impact on growth of a rise in rates. Just as the lowering of rates had virtually no effect on growth since 2010, conversely the rise in rates will have a major effect. The reasons for this apparent anomaly lie in the conditions of debt and fragility in the USA economy, which I won’t go into here but I explain in my forthcoming book, ‘Systemic Fragility in the Global Economy’ that will be available later this spring.

Taylan Tosun:

We know from economic theory that if a recession continues long enough and a sustainable recovery can’t be attained, then sooner or later we will face with a depression. The Euro zone and Japan economies are already in recession, it seems that the slowdown of Chinese economy is not temporary phenomenon, Russia is heading to a serious crisis and emerging markets’ economies (EME’s) are all entering in a period of steady slowdown. Do you think is it probable that these state of affairs will lead to a worldwide depression?

Jack Rasmus:

No, not a depression but rather a long term drift toward stagnation in the global economy, where major economies fluctuate, entering and exiting recessions or growing barely. This is the ‘stop-go’ or epic recession phenomenon that characterizes the current global economy long term: Short shallow recoveries followed by relapses to zero or negative growth (recessions). We see this in Europe and Japan, where last years return to recessions are now apparently transitioning to very low but positive growth of less than 0.5%. The USA is slipping back to its 1.8% average longer term GDP. China is slowing, now probably at around 5% GDP. And emerging markets are going to experience the brunt of the current slowdown, as their currencies collapse, exports continue to slow, and capital reverts back to the north. Both the USA rise in rates and the value of the dollar will suck capital out of the emerging markets. So will QE induced stock and bond market recoveries in Europe and Japan, at least temporarily for 2015. But this all reflects an uneven drift toward global stagnation as a whole. Depressions are precipitated by financial instability events and crashes, that drive the real economy down faster and deeper than normal recessions. We haven’t had that again yet, but will. A period of extended stagnation leads to banks’ growing weaker and more investing shifting to financial assets and speculation, which is occurring. At some point it becomes unsustainable and a financial crisis occurs. When that happens again, and it will, the crash will occur on a much weaker global economy that existed in 2008-09. So the impact will be much more severe. A bona fide depression could occur at that point. But we’re not there yet. We’re in a phase of the global economic crisis where global growth is drifting toward stagnation, disinflation and deflation is occurring, real asset investment is in decline everywhere, incomes are falling for wage earners, and governments’ fiscal and monetary responses are becoming increasingly ineffective in generating sustained economic growth.

Jack Rasmus provides updates on the continuing negative effects of the Eurozone QE announced last month, the Greek Debt-Troika negotiations over the past week, and details on last week’s announced IMF-Ukraine bailout #2. In the first half hour, Jack describes how the Eurozone QE is intensifying currency wars and forcing other Euro countries into introducing negative interest rates, which will have major negative economic effects. Then an update on how the Greeks are succeeding to push the Troika closer to their (Greek) bargaining position, to provide them bridge loans and renegotiate the debt based on an ending of austerity. In the second half of the hour, Jack provides details on the 2nd IMF bailout deal for Ukraine also just announced this past week. How the bailout package has risen from $17.1 last April 2014 now to $40 billion—now approaching Jack’s forecast last April that Ukraine would need a minimum of $50 billion. Jack’s 2014 forecast of a collapse of Ukraine’s GDP of 10%, of its currency, and other indicators are now also realized. The second IMF bailout will not stop the decline of the Ukraine economy either, Jack argues. The show concludes with an analysis of the ‘Grand Strategies’ of the USA, Germany-France, and Russia with regard to the Ukraine, the conflict over which has always been a proxy for a larger strategic fight between the USA and Russia, over the future of Europe it self and which way Europe will orient economically in the decades ahead.

Dr. Rasmus on Twitter

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